The clamour grows ever louder that oil and gas companies should move wholesale into renewables. However, the experience of one company that did illustrates the challenges involved.
But it opens an opportunity for a bold swoop – whether by a European oil major or a Middle Eastern investor.
Danish Oil and Natural Gas (Dong) was a fairly successful developer of oil and gasfields in the seas of north-western Europe. But in May 2017, it sold its largest fields in Norway.
In November of that year, it renamed itself Orsted, after a Danish physicist (and friend of Hans Christian Andersen), who discovered the connection between electricity and magnetism.
The company concentrated on offshore wind power instead, where its home nation was already a leader. And the first few years under its new strategy were indeed a fairy tale.
By January 2021, it was the world’s biggest offshore wind developer and its shares had soared more than five times to a market capitalisation of almost $80 billion.
That was the high point, followed by a swift tumble. Today its shares are essentially back at the level when it metamorphosed, and it is valued at about $17 billion.
Yet this comes against the backdrop of an expansion in offshore wind globally. Orsted now has 15.5 gigawatts of operating renewable capacity, and another 15.5 gigawatts under construction or awarded.
Unlike onshore, there are few size constraints offshore. The 35 metre-high, 0.45-megawatt turbines that started the Danish wind journey in 1991 have now been replaced by 15-megawatt turbines that are 280 metres, almost as high as the Eiffel Tower.
Offshore winds are stronger and more consistent. Offshore turbines are also away from local communities, meaning objections are unlikely.
The cost of UK offshore wind dropped from £155 per megawatt hour in 2015 to just £37.50 last year, half the current wholesale electricity market rate.
So what has gone wrong?
In the past two years, interest rates have risen sharply, raising the burden of financing capital-intensive long-term projects.
Equipment costs have gone up, reversing a long trend of cheaper systems, and undermining the economics of projects companies had been awarded previously.
Governments have been unwilling to raise the amounts they agreed to pay for clean power. Environmental groups seeking to protect habitats, fishermen worried about disturbances to their catch, and military interests hoarding training grounds combine to frustrate developments.
Last month, New York rejected requests by Orsted, Norwegian state energy company Equinor and others for rises in rates of between 27 and 54 per cent on previously committed projects.
In the UK’s latest offshore wind auction, no companies bid after the government refused to raise the maximum price to reflect the market changes.
Earlier in the year, Swedish utility Vattenfall said it would give up on the Norfolk Boreas wind farm as the higher costs had made it unviable.
Orsted is not the only renewable company facing problems. Siemens Energy, spun out of Siemens in September 2020, has run into severe trouble with faults in the wind turbine blades it sells, following its acquisition of Spanish manufacturer Gamesa in 2017.
It is on the hook for at least $1.7 billion in repair bills, and its shares are down 70 per cent since January 2021. The company is seeking $16 billion in German government guarantees, which it insists is not a bail out, to help it complete its portfolio of industrial projects.
However, there could be an opportunity. Offshore wind power remains an exciting and competitive source of low-carbon electricity. The cost inflation and interest rate rises will work their way through the system as supply chains catch up.
One ambition of the Cop28 conference in Dubai this month is for countries to commit to triple global renewable energy capacity, in line with, for example, the UK’s plans for offshore wind.
The US wants to raise its 50 megawatts of ocean wind today to 30 gigawatts by the end of the decade.
The European oil companies have had ambitious renewable targets and saw offshore wind as one area that might play to their strengths.
BP says it wants 50 gigawatts of all renewables by 2030; France’s TotalEnergies aims for 100 gigawatts; and Equinor for 12 to 16 gigawatts specifically of offshore wind.
But BP and Shell in particular have notably scaled back ambitions, putting more emphasis on profitability. They have discovered that extracting full value from complex offshore wind assets is a specialist job.
Reaching these targets by organic growth or small acquisitions alone looks difficult. Pre-pandemic, it was suggested that to build scale and expertise, an oil major might buy a large renewable company, but valuations ran away from them.
That again looks more in reach for a contrarian investor. The European oil companies sat out the recent wave of US shale consolidation – they have voluminous cash flow and not much idea of how to spend it other than share buy-backs.
If not a European oil company, how about a Middle East investor? Regional companies have big ambitions of their own, but if buying a whole company is too much of a stretch or a political hot potato, they could take a large strategic stake. European governments might object, but this would also look hypocritical.
Such a deal could also bring offshore wind to areas the Europeans have so far been shy of, including the Middle East, Africa and the Caspian. If an investor today can weather a few turbulent years, they could ride a brisk tailwind afterwards.
Robin M. Mills is chief executive of Qamar Energy, and author of The Myth of the Oil Crisis
THE TWIN BIO
Their favourite city: Dubai
Their favourite food: Khaleeji
Their favourite past-time : walking on the beach
Their favorite quote: ‘we rise by lifting others’ by Robert Ingersoll
Lexus LX700h specs
Engine: 3.4-litre twin-turbo V6 plus supplementary electric motor
Power: 464hp at 5,200rpm
Torque: 790Nm from 2,000-3,600rpm
Transmission: 10-speed auto
Fuel consumption: 11.7L/100km
On sale: Now
Price: From Dh590,000
Infiniti QX80 specs
Engine: twin-turbocharged 3.5-liter V6
Power: 450hp
Torque: 700Nm
Price: From Dh450,000, Autograph model from Dh510,000
Available: Now
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
Key figures in the life of the fort
Sheikh Dhiyab bin Isa (ruled 1761-1793) Built Qasr Al Hosn as a watchtower to guard over the only freshwater well on Abu Dhabi island.
Sheikh Shakhbut bin Dhiyab (ruled 1793-1816) Expanded the tower into a small fort and transferred his ruling place of residence from Liwa Oasis to the fort on the island.
Sheikh Tahnoon bin Shakhbut (ruled 1818-1833) Expanded Qasr Al Hosn further as Abu Dhabi grew from a small village of palm huts to a town of more than 5,000 inhabitants.
Sheikh Khalifa bin Shakhbut (ruled 1833-1845) Repaired and fortified the fort.
Sheikh Saeed bin Tahnoon (ruled 1845-1855) Turned Qasr Al Hosn into a strong two-storied structure.
Sheikh Zayed bin Khalifa (ruled 1855-1909) Expanded Qasr Al Hosn further to reflect the emirate's increasing prominence.
Sheikh Shakhbut bin Sultan (ruled 1928-1966) Renovated and enlarged Qasr Al Hosn, adding a decorative arch and two new villas.
Sheikh Zayed bin Sultan (ruled 1966-2004) Moved the royal residence to Al Manhal palace and kept his diwan at Qasr Al Hosn.
Sources: Jayanti Maitra, www.adach.ae
Red flags
- Promises of high, fixed or 'guaranteed' returns.
- Unregulated structured products or complex investments often used to bypass traditional safeguards.
- Lack of clear information, vague language, no access to audited financials.
- Overseas companies targeting investors in other jurisdictions - this can make legal recovery difficult.
- Hard-selling tactics - creating urgency, offering 'exclusive' deals.
Courtesy: Carol Glynn, founder of Conscious Finance Coaching
Killing of Qassem Suleimani
Killing of Qassem Suleimani
Key findings of Jenkins report
- Founder of the Muslim Brotherhood, Hassan al Banna, "accepted the political utility of violence"
- Views of key Muslim Brotherhood ideologue, Sayyid Qutb, have “consistently been understood” as permitting “the use of extreme violence in the pursuit of the perfect Islamic society” and “never been institutionally disowned” by the movement.
- Muslim Brotherhood at all levels has repeatedly defended Hamas attacks against Israel, including the use of suicide bombers and the killing of civilians.
- Laying out the report in the House of Commons, David Cameron told MPs: "The main findings of the review support the conclusion that membership of, association with, or influence by the Muslim Brotherhood should be considered as a possible indicator of extremism."
more from Janine di Giovanni
Teaching in coronavirus times
Four-day collections of TOH
Day Indian Rs (Dh)
Thursday 500.75 million (25.23m)
Friday 280.25m (14.12m)
Saturday 220.75m (11.21m)
Sunday 170.25m (8.58m)
Total 1.19bn (59.15m)
(Figures in millions, approximate)
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More from Rashmee Roshan Lall
UAE currency: the story behind the money in your pockets
The specs
AT4 Ultimate, as tested
Engine: 6.2-litre V8
Power: 420hp
Torque: 623Nm
Transmission: 10-speed automatic
Price: From Dh330,800 (Elevation: Dh236,400; AT4: Dh286,800; Denali: Dh345,800)
On sale: Now
The Bio
Amal likes watching Japanese animation movies and Manga - her favourite is The Ancient Magus Bride
She is the eldest of 11 children, and has four brothers and six sisters.
Her dream is to meet with all of her friends online from around the world who supported her work throughout the years
Her favourite meal is pizza and stuffed vine leaves
She ams to improve her English and learn Japanese, which many animated programmes originate in
THE SPECS
GMC Sierra Denali 1500
Engine: 6.2-litre V8
Transmission: 10-speed automatic
Power: 420hp
Torque: 623Nm
Price: Dh232,500
The specs
Engine: 4.0-litre V8 twin-turbocharged and three electric motors
Power: Combined output 920hp
Torque: 730Nm at 4,000-7,000rpm
Transmission: 8-speed dual-clutch automatic
Fuel consumption: 11.2L/100km
On sale: Now, deliveries expected later in 2025
Price: expected to start at Dh1,432,000
Quick facts on cancer
- Cancer is the second-leading cause of death worldwide, after cardiovascular diseases
- About one in five men and one in six women will develop cancer in their lifetime
- By 2040, global cancer cases are on track to reach 30 million
- 70 per cent of cancer deaths occur in low and middle-income countries
- This rate is expected to increase to 75 per cent by 2030
- At least one third of common cancers are preventable
- Genetic mutations play a role in 5 per cent to 10 per cent of cancers
- Up to 3.7 million lives could be saved annually by implementing the right health
strategies
- The total annual economic cost of cancer is $1.16 trillion
The National's picks
4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
8.50pm: Calandogan
9.30pm: Forever Young
The five pillars of Islam
UAE currency: the story behind the money in your pockets
The burning issue
The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.
Read part four: an affection for classic cars lives on
Read part three: the age of the electric vehicle begins
Read part one: how cars came to the UAE
The Voice of Hind Rajab
Starring: Saja Kilani, Clara Khoury, Motaz Malhees
Director: Kaouther Ben Hania
Rating: 4/5
Traits of Chinese zodiac animals
Tiger:independent, successful, volatile
Rat:witty, creative, charming
Ox:diligent, perseverent, conservative
Rabbit:gracious, considerate, sensitive
Dragon:prosperous, brave, rash
Snake:calm, thoughtful, stubborn
Horse:faithful, energetic, carefree
Sheep:easy-going, peacemaker, curious
Monkey:family-orientated, clever, playful
Rooster:honest, confident, pompous
Dog:loyal, kind, perfectionist
Boar:loving, tolerant, indulgent
Results:
CSIL 2-star 145cm One Round with Jump-Off
1. Alice Debany Clero (USA) on Amareusa S 38.83 seconds
2. Anikka Sande (NOR) For Cash 2 39.09
3. Georgia Tame (GBR) Cash Up 39.42
4. Nadia Taryam (UAE) Askaria 3 39.63
5. Miriam Schneider (GER) Fidelius G 47.74
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Killing of Qassem Suleimani
